Outpatient surgery centers see big jump in profits

Report shows proliferation of centers in Pennsylvania.

Rebecca Easterday says that when patients come to the Mahoning Valley Ambulatory Surgery Center, they get personalized treatment they might not experience at a big hospital.

"They're not treated as if they're a number," said Easterday, the clinical director at the Tamaqua-based center, which specializes in eye care.

Perhaps that's why ambulatory — or outpatient — surgery centers are continuing to be a growth industry within health care providers, as shown in a new report by the Pennsylvania Health Care Cost Containment Council (PHC4).

The state now has 271 ambulatory surgery centers, more than double their number of 10 years ago, according to the report. Even more significantly, ambulatory surgery centers in 2011 did nearly 1 million outpatient surgical and non-surgical procedures, tripling their share of the care in the past decade.

Besides personalized care, Easterday said the surgical centers often can take care of patients more quickly than hospitals. At the center, about 1,000 cataract procedures are done annually, sprinkled with a handful of procedures to ease glaucoma. A typical cataract patient can be in and out of the center in 90 minutes to two hours, she said — half the time that might be needed at a hospital.

The vast majority of the centers are for-profit operations, as opposed to hospital systems such as Lehigh Valley or St. Luke's University health networks, which are primarily nonprofit.

There are exceptions, such as the purchase last year of the Fairgrounds Surgical Center in Allentown by LVH. Spokesman Brian Downs said the network bought the business to free up access to patients with emergencies.

"The move to full ownership allowed for Fairgrounds Surgical Center to complement the surgical care already provided by the network's three hospital locations," he said. "The additional space for ambulatory surgeries improved access for other surgical patients by expanding capacity in the hospital operating rooms."

The report also found that the centers are, on average, highly profitable. According to the agency, the total margin — the ratio of "profits" to revenues — was 25.2 percent. Broken out by region, the data show that ambulatory surgery centers in the Lehigh Valley region, including Lehigh, Northampton, Berks, Carbon and Schuylkill counties, were even more profitable, posting an average total margin of 34.3 percent.

For the year, the centers' "already significant" profit margin inched up from 24.99 percent in 2010, PHC4 said.

The Hospital and Healthsystem Association of Pennsylvania saw danger in the numbers. In a prepared statement, the association said hospitals statewide had total profit margins of 6.9 percent. The reason for the disparity, it said, is that Medicaid, the state-federal health insurance program for the poor and disabled, accounted for 4.7 percent of ambulatory centers' revenue, compared to 12 percent of general hospital's revenue. Medicaid reimbursements generally don't cover all of a provider's costs.

"Looming across-the-board, 2 percent 'sequestration' budget cuts by Congress, effective in January, will reduce federal reimbursements to Pennsylvania's hospitals by $149 million in 2013 and $1.4 billion by 2021," said HAP President and CEO Carolyn F. Scanlan said in the statement. "These new cuts are in addition to the more than $7.5 billion in cuts accepted by Pennsylvania's hospitals as part of the Affordable Care Act.

She said the ambulatory centers treat healthier, usually better-insured patients.

"The bottom line for our patients is access," Scanlan said. "We continue to support maximizing insurance coverage for all Americans, but it cannot be done by reductions to providers, without whom nobody —insured or not — will be able to get care."

PHC4 is an independent state agency that collects, analyzes and reports information to improve the quality and restrain the cost of health care in Pennsylvania. Copies of the report are available at http://www.phc4.org.